Chrysler Corp. is eyeing a cut in its 1998 national ad spending of as much as $200 million.
The possible trim of Chrysler's more than $1.1 billion U.S. media expenditure is a continuation of the automaker's ongoing effort to cut costs and improve its bottom line, said three executives close to Chrysler.
Several top-level network TV executives are already nervous about a domino effect in other categories following Chrysler's cuts.
The news comes as a cost-cutter, Thomas Stallkamp, was named Chrysler's next president, effective Jan. 1. As exec VP-procurement and supply, he helped the carmaker trim more than $1 billion in manufacturing supplier costs this year.
Detroit's other top carmakers, General Motors Corp. and Ford Motor Co., have gotten comparable savings from manufacturing, and industry observers have long speculated it could be only a matter of time before the knives turn to advertising.
CAR LAUNCHES UNAFFECTED
Insiders said Chrysler's coming new car launches--the Dodge Intrepid in January and the Chrysler Concorde, expected late in the first quarter or early spring--won't be affected by the cutbacks. Models with minor changes for the '98 model year are the most vulnerable, they added.
Chrysler's top marketing executives, reached at a meeting in Phoenix last week, declined to comment.
Industry sales this year have been spurred by record customer incentives that started in the summer, an earlier-than-usual model-year clear-out. Chrysler may move the planned media dollars into incentives, said one of the executives close to Chrysler.
Chrysler has already committed $50 million in spending to the Winter Olympics on CBS in February, and the carmaker's first-quarter buy is already set. But Chrysler is likely to exercise options to pull commercial time it already bought in the second quarter.
Depending on the upfront deal Chrysler has cut, with the networks, the automaker would have to give 60 to 90 days' notice.
Generally speaking, Chrysler would be able to cancel up to 50% of time it has already bought. Network executives said the automaker has not said anything about calling any options for the second quarter.
"I hear [cuts] may be as much as $200 million. Is that possible?" said one network executive.
"This kind of thing can have a domino effect," said another. "Here you have a company that just reports [November unit] sales are up 4% and it's cutting ad spending."
He added, "Most of us have assumed that with the economy still booming, we'd have at least another year of decent--if not record--ad budgets to deal with."
DRIVING PRIME TIME
The auto companies are especially active in prime time and during TV news magazines, "and, along with the movie companies are the big drivers of [prime time]," said one executive at an ad agency with a competing car account.
Chrysler will need national network time for the 1998 Intrepid and Concorde launches, said another agency media executive.
"Cable TV might take a hit in a big cutback" for that reason, he speculated, as well as spot TV and syndication.
One question is how a big cutback would affect print advertising. Chrysler could quickly cut its national newspaper program, one of the executives close to Chrysler predicted.
A few months ago, Nissan Motor Corp. USA canceled its magazine buys for the remainder of this year.
"I don't know if it was just hard-ball negotiating or in preparation of a cutback, but Chrysler was pretty adamant is holding most publishers to 1% [cost-per-thousand] increases," said one publishing insider, talking about the automaker's recent negotiations with magazines.
Auto consultant John Bulcroft, who oversaw marketing at Porsche Cars North America and Audi of America in the late 1970s, said if Chrysler does trim spending, it may spur competitors to beef up their media budgets rather than follow with cuts of their own.
Mr. Bulcroft suggested Chrysler may move the media dollars into non-traditional, unmeasured media, a slow-growing trend in the auto industry over the past several years.
The carmaker upped its non-measured media spending to nearly $311 million last year from $293 million in 1995. Its measured media jumped to $1.1 billion last year vs. $974 million in '95, according to Competitive Media Reporting.
Copyright December 1997, Crain Communications Inc.